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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: Prognosticator who wrote (18595)	8/11/1999 4:08:00 PM
From: QwikSand	Respond to of 64865

Not a new story, but interesting nonetheless. I especially like the quote from Warren Buffett: "Accounting principles offer management a choice: pay employees in one form and count the cost, or pay them in another form and ignore the cost. Small wonder then that the use of options has mushroomed,” he observes. “If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? And, if expenses shouldn't go into the calculation of earnings, where in the world should they go?" I wonder if a need to make good on executives' huge option holdings has anything to do with recent SUNW debt offerings? I certainly have no way of finding out; seems like they had enough cash anyway to buy the shares. But one never knows. Regards, --QwikSand

To: Prognosticator who wrote (18595)	8/11/1999 4:13:00 PM
From: Prognosticator	Read Replies (1) \| Respond to of 64865

More bad news for Microsoft, but a really obvious trend here in Silicon Valley. news.com <sarcasm mode> However, Microsoft can solve this problem by simply buying all the Universities. I can see it now: you won't be going to school to get a degree in engineering, you'll be going to Microsoft to get a degree in Windows. </sarcasm mode> P.

To: Prognosticator who wrote (18595)	8/11/1999 5:17:00 PM
From: Charles Tutt	Read Replies (1) \| Respond to of 64865

I believe we discussed this issue in this very forum about a year or so ago. I may even have been the person who brought it up. Most of the heavy lifting on the Black-Scholes front is done by the corporations in preparing their disclosures, which appear in the notes to their annual financial statements. Both Sun's and Microsoft's disclosures are available online. My recollection is that Microsoft has been particularly promiscuous with options, but do your own research and form your own conclusions. JMHO.

To: Prognosticator who wrote (18595)	8/11/1999 6:31:00 PM
From: Alok Sinha	Respond to of 64865

An excellent article which has appeared in several forms in reputed magazine and journals over the last few years. Although the disclosure of the option cost is now mandatory, not having it included in emplyoyee expenses is ridiculuous (from an economic standpoint). Especially in today's environment where scores of individuals settle for lower cash comp in exchange for options. One of the favorite argument of the tech lobby during the debate about including it in the earnings was that the cost cannot be estimated. Given the complex derivatives that are valued in the marketplace today, employee stock options (with their vesting characterisitcs, etc) are relatively easy to value. The failure to implement FASB's recommendation was a classic case of lack of political will (Clinton+Republicans) to do the right thing. For once, I found myself on the side of the accountants and the AFL-CIO on this issue. Regards Alok

To: Prognosticator who wrote (18595)	8/15/1999 5:36:00 PM
From: Mephisto	Respond to of 64865

RUMBLINGS OF AN AVALANCHE EXCERPTS from an article by Gretchen Morgenson "Companies of all kinds have issued oceans of options in recent years. As long as stocks were rising, option holders hesitated to exercise them, waiting for even further gins. Now, with many stocks?especially Nasdaq stocks?well off their highs, transforming paper profits into real gains is mighty tempting. How big is the overhang? Bob Gabele, director of insider research at First Call/Thomson Financial, calculated all the option grants made by companies in the Nasdaq 100 stock index from 1994 to 1998. A staggering 4 billion shares were granted, worth $220 billion at recent prices. That amounts to roughly 9 percent of the market value of the entire Nasdaq 100 index. "This is an avalanche-in-waiting," said Baruch Lev, professor of accounting and finance at New York University's Stern School of Business.." ?."most option grants are exercisable now. Cisco Systems said in its 1998 annual report that the average strike price of its option grants - 1,562 billion shares?was $25.23. Cisco stock closed Friday at $63,5625. Companies report their option grants in the footnotes to the financial statements. To calculate the overhand, take the number of shares provided for in those grants and divide it into the total shares the company has outstanding." From Market Watch by Gretchen Morgenson in The New York Times, Sunday, August 15, 1999, Section 3. ************************************************************ Dear Prognosticator, A year or so ago Ms. Morgenson published a column about MSFT's purchase of options for the company I recall that she said that MSFT reported the gains/losses that it made when it sold those options in the company's earnings reports. Unlike some other companies, MSFT did not make a distinction about the source of the revenue. Since this was a year ago, or longer, MSFT could have changed company polices about reporting income from options that they sold. Sincerely, Mephisto